Morrisons

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Wm Morrison Supermarkets PLC

Type of Company	Public LSE: MRW
Founded	1899
Headquarters	Bradford, England
Key people	Sir Ken Morrison, Executive Chairman Marc Bolland Chief Executive industry = Retail (Grocery)
Revenue	£12,115 million (52 weeks to 29 January 2006)
Employees	118,880
Slogan	"More reasons to shop at Morrisons"
Website	www.morrisons.co.uk

Morrisons store in Morecambe, Lancashire

Wm Morrison Supermarkets plc (LSE: MRW) is the fourth largest chain of supermarkets in the United Kingdom. The company is usually referred to as Morrisons and it is part of the FTSE 100 Index of companies.

The company is currently reviewing its brand identity- see below.

1 History
2 Morrisons today
3 Trading performance
4 Takeover of Safeway
5 Store conversions and disposals
6 Store formats
7 Marketing and branding
8 Future
9 Trivia
10 Financial performance
11 See also
12 External links

[edit] History

Morrisons was founded by William Morrison in 1899, initially as an egg and butter merchant in Rawson Market, Bradford, England. His son, Sir Ken Morrison is now executive chairman of the company.

From the early 1900s the company used the name Wm Morrison (Provisions) Limited. Sir Ken took over the company in 1952, aged 21. In 1958 it opened a small shop in the city centre, followed by its first supermarket "Victoria", in the Girlington district of Bradford in 1961. In 1967 it became a public company listed on the London Stock Exchange.

[edit] Morrisons today

As of November 2006, Morrisons has 367 [1] superstores in the United Kingdom, including those it has retained following its purchase of Safeway plc (see below). Until 2004, Morrisons superstores were largely concentrated in the English Midlands and the north of England, but had expanded southwards, beginning with a store at Erith, Kent, which opened in 1998 [2]. Most Morrisons stores operate from large superstore formats selling a wide range of products including the core groceries.

In May 2006, Sir Ken announced he is to step down as executive chairman in January 2008 after serving with the company for 56 years. The following month, it was announced that Marc Bolland, the Dutch chief operating officer of Heineken had been appointed as the new chief executive of Morrisons.

Morrisons is now one of just four supermarket chains that dominate the full-size superstore market in the United Kingdom. In descending order of size the other three are Tesco, ASDA (owned by Wal-Mart), and Sainsbury's. Morrisons strategy is based on doing the basics efficiently, selling predominantly food at low prices, and doing so only from large stores. This is a different approach from the other three big chains: Tesco and Sainsbury's in particular have moved into "retail services" such as banking; the same two companies are expanding into the convenience store sector; and Tesco and ASDA place great emphasis on their non-food ranges and are experimenting with stand alone non-food stores.

The Morrison family currently own around 22% of the company, compared to the 18% they were previously thought to have recently held [3]. This was diluted from the near 40% they owned before buying Safeway plc in March 2004.

Some analysts have expressed concern that Morrisons value-focused marketing may not be as successful in affluent parts of Southern England, as they are in the company's traditional northern heartlands. At the 2005 annual results briefing, Sir Ken Morrison informed investors, "I don't know what a middle class shopper is."

In September 2006, Morrisons finally announced it was seeing the benefits of its takeover of Safeway, with a return to profits of £134.2m for the six months to the end of July 2006, which is actually a company record.

[edit] Trading performance

In January 2006, Morrisons announced that sales at former Safeway stores were up 9% in the last six weeks of 2005, with sales at the core Morrisons estate down by 0.7%. The overall figure was a sales rise of 2.8%. The company also announced a £30 million one-off charge for the closure of former Safeway depots in Kent, Bristol and Warrington with the loss of 2,500 jobs. The Kent depot has since been sold to upmarket rival Waitrose, whilst Warrington was apparently sold to frozen food rival Iceland (supermarket).

In March 2006, Morrisons announced that sales at its 378 stores trading in the first 7 weeks of its new financial year were up 3.2%. By the first 16 weeks however, the rate of momentum increased when sales rose 3.7% at the then 378 trading stores. (Now 367 stores). After taking into account new stores opened in 2005 and the effect of store disposals, the increase was 5.5%.

On 3rd August 2006, Morrisons provided a sales update. Like for like sales in the 25 weeks to 23 July continued the growing trend, increasing by 6.6% (4.6% excluding fuel). Like for like sales in core Morrisons stores operated by Morrisons before the Safeway takeover- continued to improve, as they have in the converted stores, including those that are now in their second year of conversion. Sales generated through new space contributed an additional 1.9% (1.9% ex fuel). Total sales increased marginally by 0.1% (decreased by 2.2% ex fuel), reflecting the impact of the significant store disposal programme undertaken last year. In the 9 weeks since the AGM like for like sales have increased by 7.5% (6.1% ex fuel).

In September 2006, Chairman Sir Ken Morrison announced profits of £134.2m for the 25 weeks ending 23 July 2006. This compares to an (£82.1m) loss for the same period in 2005. Its 'Optimisation Plan' is ahead of schedule, with 50bps of the 90bps target over three years expected to be achieved this year. Sales were flat at £5.85bn, reflecting the divestment of 66 stores during the period.

[edit] Takeover of Safeway

On 8 March 2004 the takeover by Morrisons of Safeway plc was completed (See the Safeway entry for full details of this deal). Stores under the Safeway brand were concentrated in the south of England and Scotland, thus giving Morrisons a nationwide presence for the first time. Morrisons proceeded to rebrand the supermarkets under its own name and the convenience stores were initially rebranded as "Safeway Compact". Most larger Safeway stores were converted to the Morrisons Market Street format, while others were sold off (see below).

The best parts of the Safeway own-brand offer, such as "The Best" range of high quality foods, and "Eat Smart" range of healthy foods, were adopted across the Morrisons chain, along with many former Safeway products. 'The Best' range offers a wide variety of more upmarket products (food or otherwise) which are available in all stores. These own-brands go alongside the original Morrisons store brands such as Bettabuy, Morrisons' range of economy products. "The Best" was re-packaged and relaunched in September 2006 to compete with the increasingly diverse ranges of other supermarket chains. At the same time, Morrisons substantially increased its range of organic products.

In July 2004, Morrisons shocked the stock market with its first ever profits warning, largely caused by falling sales at Safeway stores. It emerged that Safeway had changed its accounting system just three weeks before the takeover and inflated its books by taking early bonus payments from suppliers, thus creating a deficit in excess of £180 million when the Morrisons accounting system was applied.

There was much initial controversy surrounding who was to blame for the early problems in integration. Morrisons and Safeway applied supplier commission at opposite ends of the scale - Safeway at the beginning of a deal and Morrisons at the very end. Safeway insiders claimed that the new accounting system had been in production for over two years prior to the takeover and said that Morrisons had full knowledge of the change in system before their takeover.

One problem for Morrisons was its radically different approach to people management. Under Safeway, store managers at a local level were given the power to plan their own promotions, stock certain items, vary prices according to local competition and even recruit additional staff; recognising the differing needs of different localities. Morrisons, on the other hand, operated a strict policy of uniformity across all its stores, with the same ranges and pricing regardless of location. While Morrisons retained its northern bias, this strategy worked well, but was less suited to the more diverse siting of former Safeway stores. The product policy has now been loosened slightly, although pricing is still centrally controlled and managers have nothing like the flexibility they enjoyed under Safeway. Also Morrisons' pay to its staff is the lowest of the 'Big 4'. Due to this, staff turnover is one of the highest in the retail sector.

It has since been admitted by Morrisons itself that the in-house finance team was ill-equipped for the task of integration and management of the newly enlarged business, which contributed in part to the early problems and profit warnings.

Converted stores now show sales up around 20 percent under the Morrisons fascia.

[edit] Store conversions and disposals

The programme of store conversions from Safeway to Morrisons was the largest of its kind in British retail history, focusing initially on the retained stores which were freehold, over 25,000 sq ft with separate car parks. Within a few weeks, Safeway carrier bags were replaced by those of Morrisons and the new owner's own-brand products began to appear in Safeway stores.

Originally 52 stores were to be compulsorily divested after the takeover, but this was reduced to 50 after one Safeway store in Sunderland was burned down and the lease ended on another in Leeds city centre. John Lewis Partnership purchased 19 to be part of its Waitrose chain, while J Sainsbury plc purchased a further 14, and Tesco bought 10 in October 2004.

In late 2004 it was announced that the 114 smaller 'Safeway Compact' stores were to be sold off to rival supermarket chain Somerfield] in a two- part deal worth in total £260.2 million. One of the main reasons was the Morrisons 'Market Street' store format, which is better suited to larger stores, while Somerfield better known for smaller outlets. Also, Morrisons' senior management had realised that the challenge of integrating the larger stores would keep them fully occupied in the short term.

In Northern Ireland Morrisons sold Safeway Stores (Ireland) to ASDA. This included a store in Bangor which actually opened after the Morrisons takeover.

Morrisons continued to sell and close stores - not covered by the Competition Commission ruling - which it felt did not fit with the scale and layout of its Market Street format. In total, 254 stores were sold off by October 2006, which left the chain with 367 stores by November 2006. In all, 72 stores were sold that were neither part of the original Competition Commission ruling or part of the Safeway Compact portfolio.

One of the largest single purchase in 2005 was that of five stores by Waitrose. Unlike other operators, most notably Tesco and Sainsbury's, Morrisons has chosen not to move into the convenience store sector.

On July 18, 2006, a further six stores from the 'Rump' format were sold to Waitrose, including the former Safeway store in Hexham, Northumberland, which became the most northerly Waitrose branch in England.

In May 2005, Morrisons announced the termination of Safeway's joint venture convenience store/petrol station format with BP. Under the deal, the premises were split 50/50 between the two companies. Five sites were subsequently sold on to BP, while Morrisons sold the rest of its sites to Somerfield and Tesco, which both maintain a presence in this market sector.

Morrisons also sold Safeway's Channel Island stores, in Guernsey and Jersey, to CI Traders. The Douglas store was sold to Shoprite, the Ramsey store was sold to the Co-op, but the Gibraltar store is no longer being marketed for sale, instead opting to carry the Rump format.

The conversion and store divestment process was completed on 24 November 2005 when the Safeway fascia disappeared from the UK.

Morrisons store in Consett, County Durham, a former Safeway branch

As of December 2006, Morrisons is continuing to review its store portfolio. There are still some former Safeway stores earmarked for disposal and the 158 stores under 25,000 sq ft could be converted to a separate format called Morrisons Choice, as it is currently being referred to internally. Some of these stores could also be re-modelled and/or extended.

[edit] Store formats

The format of most Morrisons superstores is called Market Street. The meat is near or next to the butcher's counter, the delicatessen being traditionally named Provisions with cheese fridge nearby and a rotisserie counter named Oven Fresh. There's a Pie Shop in every store and a bell rings when a fresh batch comes out of the oven. The overall theme is based on an early 20th century street setting in the north of England running around the edge of the store, with more conventional aisles in the centre.

Most Morrisons superstores are typically between 28,500 sq ft and 36,000 sq ft, with an increasing number above 36,000 sq ft, offering food, homewares, some essential clothing (ie. socks, underwear), cafés and petrol stations. 209 stores are above 25,000 sq ft. A number of Safeway stores retained by Morrisons were between 15,000 sq ft and 25,000 sq ft, with 144 stores currently in this format. These are referred to internally as the 'Choice' format, stores which do not have shopfront-style counter facades, but simply signs proclaiming the name. Morrisons hopes to replace or expand these stores to make room for the full 'Market Street' format in the future. There are also 14 stores under 15,000 sq ft, coming under the same internal sub-brand. [4].

The 'Rump' format are the same size as 'Choice' stores, but just carry the Morrisons outer logo signs, staff uniforms, product lines and IT Systems, while otherwise remaining largely as they did before the takeover of Safeway. Certain items within the stores, such as checkout dividers, car park signs and some internal signage, have simply had the Morrisons logo applied over the Safeway logo and can still clearly be identified as Safeway, whereas all evidence of the old brand has been removed from other stores. These stores are earmarked for divestment or replacement in the very near future [5].

All three formats trade simply as Morrisons, so there is no obvious way to tell them apart unless you know what to look for. A regular Morrisons shopper, used to the company's policy of uniform pricing and stock across all its stores, might notice a smaller product range at a "Choice" or "Rump" store, mainly due to the space constraints.

[edit] Marketing and branding

Morrisons products are currently marketed under two slogans, "More reasons to shop at Morrisons" and "The very best for less". The more reasons campaign is backed up with separate adverts explaining numbered "reasons". There are usually a large range of special offers in each store.

The company is perceived to trade towards the lower end of the mainstream supermarket sector, offering value above choice and premium quality. Morrison's trademark black and yellow colours, used for more than 30 years, are a long-established symbol of the company's presence, but are associated in some areas with the group's former market position as a regional supermarket chain. They were adopted right across the expanded group, however, following the Safeway takeover.

As of December 2006, Morrisons is evaluating whether to update its branding. Since the appointment of Marc Bolland as chief executive in September 2006, a strategic review has been underway.

The main option under consideration is to consider changing the current logo and the almost equally iconic "More reasons to shop at Morrisons" strapline. Any move would involve the replacement of external signage, as well as changes to product packaging, point of sale, advertising, staff uniforms and distribution vehicles. The rationale behind the review is the need for Morrisons to attract a wider national customer base, capitalising on its expanded geographical spread following the acquisition of Safeway. [6]

It is believed that Sir Ken Morrison wants to see through this sweeping change before his retirement in January 2008.

A firm announcement could be due on 15 March 2007, the date of the next shareholder presentation, when Morrisons full-year financial results will be unveiled, along with details of the second phase of its 'Optimisation Plan'.

[edit] Future

By June 2005, Morrisons had issued five profit warnings since its takeover of Safeway. Sir Ken Morrison stood down as chairman of the operational board, but remained executive chairman of the main board. In July 2005, Morrisons released figures that suggested it may have turned the corner, with a 14% sales increase in converted Safeway stores. The last Safeway stores were converted by 24 November 2005, when the Safeway brand disappeared from the UK. [7]

In March 2006, Morrisons launched a three-year 'Optimisation Plan' aimed at cutting costs to ensure future profit recovery. This includes £60m worth of cost savings in distribution and support functions, as well as adapting the smaller 'Choice' format stores below 25,000 sq ft, representing 40% of the store estate, to fit with local demographic and cultures.

As of September 2006, the company's share price has risen above £2.40. The group turned pre-tax losses of (£82.1m) in the first half of 2005 into profits of £134.2m for the same period in 2006. Morrisons attributed this to cost-cutting, better distribution and the opening of its new integrated head office, as well as the completion of the Safeway conversion and divestment programmes[8].

Like for like sales, excluding fuel, rose 4.6% in the 25 weeks to 23 July 2006, increasing by a further 1.3% to 5.9% in the eight weeks after that despite the chain having closed or sold 66 stores.

On 4 September 2006, Marc Bolland replaced the long- serving 'Morrisons lifer' Bob Stott as Chief Executive. Sir Ken Morrison remains in his role as Chairman until January 2008.

In the last few months of 2006, Morrisons has begun a covert campaign to change the public's perception of it as an ethical company^{[citation needed]}. As well as running tannoy scripts (adverts played in stores over a PA system) about how buying water from Morrisons helps people in Africa gain access to water, the recent training of staff to encourage energy saving (turning lights off, etc) indicates a change in policy^{[citation needed]}.

[edit] Trivia

All new-build Morrisons stores include a clock tower, usually above the main entrance. This means that most former Safeway stores can be identified by their lack of this feature.
In 2001, when discussing takeover speculation surrounding Safeway, Sir Ken Morrison described his then-rival as an "indigestible meal".
Morrisons owns the Farmer's Boy food factory (also in Bradford), producing pizzas, pies, cooked meats and sausages, as well as packing cheese and bacon for sales in stores.
The chain also operates two meat processing facilities where beef, pork and lamb are prepared and supplied direct to stores.
Morrisons operates a distribution network composed of in-house and third party contractors, the biggest external service provider being being DHL Exel Supply Chain.
In May 2005 Morrisons also purchased part of the collapsed Rathbones Bakeries operation for £15.5m which make Rathbones and Morrisons bread.

[edit] Financial performance

52/3 weeks to	Turnover (£'m)	Profit/(loss) before tax (£'m)	Profit/(loss) after tax (£'m)
29 January 2006	12,115	(312.9)	(250.3)
30 January 2005	12,116	193.0	105.0
1 February 2004	4,944	319.9	197.6
2 February 2003	4,290	282.5	186.3
3 February 2002	3,915	243.0	143.7
4 February 2001	3,496	219.1	120.0
29 January 2000	2,969	189.2	103.1